June is not just another month. It’s the mid-year point, the glorious start of summer, and to some industries, the peak season.

This issue of our monthly market update focuses on the tech sector performance, Canadian equities, and alternative assets. Additionally, we’ll explore the potential impact of interest rate changes and provide an overview of the gold market.

But before we dive into the key highlights and analysis, a disclaimer first:

Disclaimer: Information and opinions presented are based on data available as of the date of presentation. No equity recommendations are given in this commentary, and we encourage you to contact us if you have questions regarding any observations. Check the full disclaimer here.

Market Overview:

The S&P 500 has shown remarkable strength, particularly in the tech sector. We see three straight buy signals on a technical basis for the S&P. The setup does look good for it going into the summer.

Investors seem to have been flocking to equities, especially US equities. Although there may be occasional pullbacks, these pullbacks are creating the support lines, and we’re still well above that trend line. So, the overall outlook for the summer remains positive.

While US equities have been thriving, the situation for Canadian equities is different. The gains witnessed earlier this year have diminished. Two sell signals. Weakness in the oil sector. Natural gas isn’t any different. However, we anticipate a bottoming out of the oil market, with an OPEC meeting expected to impact prices.

The TSX (Toronto Stock Exchange) holds potential for an upside by the end of the year, supported by strong trend lines.

Tech Sector Analysis:

A monthly market update wouldn’t be complete without a discussion on the tech sector. Comparing tech stocks to other equities reveals an interesting trend. Tech has recently shown strength relative to other sectors, but this doesn’t imply an imminent downfall. Instead, it suggests that other equities might catch up. With investors transitioning from money market funds to equities, the tech sector remains an attractive investment.

Interest Rate Probabilities and US Dollar Strength:

Currently, approximately two-thirds of analysts predict that interest rates will remain the same. A third of the investors, however, believe that there’s a possibility of a rate increase. The reason why we brought this up is because of the US dollar’s recent performance. The strength of the dollar can be attributed to resolving the ceiling issue.

On the technical side, we see that USD was completely oversold from November, January, and February. This has caused a natural rebound. But some analysts believe the FED could raise rates another time, which could strengthen the US dollar further.

Gold Market Analysis:

Gold has experienced a pullback despite an overall positive performance this year. However, the market remains supported by strong support lines, particularly around the $1,940 mark. Central banks worldwide have been diversifying their foreign reserves, favouring gold over US dollar treasuries. This shift in reserves adds further support to the gold market.

Tech Sector Valuations and Artificial Intelligence:

The rapid growth of the tech sector, particularly in the field of artificial intelligence (AI), has raised concerns about valuations. Some AI companies are trading at astronomical levels. Similar patterns were observed during the rise and fall of Bitcoin and the metaverse. While a crash in the AI sector isn’t anticipated, a pullback might be expected due to these valuations. If you have more questions about this, feel free to send us a message!

Alternative Asset Opportunities:

There’s an exciting alternative asset opportunity in Harris County, Texas – a 170-acre plot of land owned by a partnership group presents a promising investment option. Lenar, a publicly traded homebuilder listed on the NYC stock exchange, has expressed more than just a passing interest in these lots.

Investing in this property would require an approximate amount of CAD 2 million, translating to around USD 9,900 to 10,000 per acre. When compared to other entitled land specifications, where prices range from USD 35,000 to 40,000 per acre, the potential return on investment becomes apparent. Considering the market value of MPC (Master Planned Community) pods at approximately USD 100,000 per acre, the property presents an attractive opportunity.

Lenar’s involvement and the partnership structure, involving private equity financing, provide a favourable framework for investment. This strategy has resulted in promising returns, with attractive multiples and a juicy internal rate of return.

That’s it for this month! We’ve provided a comprehensive analysis of various market sectors, including the tech industry, Canadian equities, and alternative assets. We encourage you to stay vigilant and make well-informed investment decisions.

Stay in the loop by signing up to receive all the latest market events from the MacNicol Investment Team.